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Supply Path Optimization

Supply path optimization (SPO), from the perspective of an advertiser, is the process of identifying and using the most efficient demand paths to purchase ad inventory, whether that means finding the most cost-effective route or the path that delivers the best performance for specific key performance indicators (KPIs).

Supply path optimization represents one of the most significant shifts in how digital advertising is bought and sold today. And the term itself has transcended just what it means to the advertising side of the ad tech industry.

Today, the concept of supply path optimization extends to have strong meaning to publishers who are providing inventory. In an effort to ensure their inventory is most attractive to buyers, the onus has now been placed on publishers to help ensure there aren’t too many duplicate paths to purchase their ad inventory.

Understanding the Basics of Supply Path Optimization

Before diving into the complexities of supply path optimization, it's essential to understand how it fits into the broader digital advertising ecosystem and what it means specifically for publishers. 

The path between advertisers and publishers has traditionally involved multiple intermediaries, each adding their own value – and their own costs – to the transaction.

  • Supply Side Platform (SSPs) aggregate publisher inventory and provide tools for optimization and management
  • Demand Side Platform (DSPs) connect advertisers to available inventory across multiple sources
  • Ad Exchanges facilitate the buying and selling of advertising inventory
  • Various resellers and other intermediaries may add additional data or services to the transaction

For publishers, supply path optimization isn't just about understanding these pathways – it's about actively managing them to maximize revenue and efficiency. This means:

  • Evaluating which SSP partners are truly driving value through unique demand
  • Managing your ads.txt file to control who can sell your inventory
  • Understanding how buyers access your inventory through different paths
  • Monitoring the performance metrics that matter to DSPs, such as viewability and engagement
  • Making strategic decisions about direct relationships versus working through intermediaries

In recent years, publishers have increasingly turned to header bidding as a strategy to maximize ad revenue. By allowing multiple demand side platform (DSPs) to bid on their inventory in real time, publishers can create a more competitive bidding environment, leading to higher CPMs. However, this also introduces complexity in managing various supply side platform (SSPs), making supply path optimization even more critical. Publishers must evaluate which SSPs provide truly unique demand and eliminate unnecessary intermediaries to ensure efficient monetization.

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The Rise of Direct-to-DSP Connections

One of the most significant trends in supply path optimization is the emergence of direct connections between publishers and DSPs. This development is reshaping how digital advertising inventory is bought and sold.

  • The Trade Desk's OpenPath has pioneered this approach, allowing select publishers to connect directly to their platform
  • Other major DSPs are exploring similar direct connection programs
  • Direct connections can potentially reduce the number of intermediaries in the supply chain
  • Publishers need to consider their scale and resources when evaluating direct connection opportunities

While direct connections might seem like an obvious choice, the reality is more nuanced than simply cutting out the middleman.

The Role of Scale in Supply Path Optimization

Scale plays a crucial role in determining the most effective supply path optimization strategy for publishers. Understanding where you fit in the ecosystem can help guide your approach to optimization.

  • Large, premium publishers may have the scale to justify direct DSP connections, or preferential treatment from SSPs
  • Mid-sized and smaller publishers often benefit from working with partners who can aggregate inventory, and negotiate with SSPs and DSPs on your behalf
  • The value of collective scale through partnerships can outweigh the benefits of independent connections
  • Publishers should evaluate their traffic volumes and resource capabilities when choosing their strategy

Finding the right balance between independence and partnership is key to successful supply path optimization.

This is where working with a partner like Playwire becomes particularly valuable. By aggregating inventory across multiple publishers, Playwire offers the scale and efficiency that DSPs are looking for while maintaining each publisher's unique value. 

Publishers benefit from shared learnings across a broad network, access to expert yield optimization teams, and the ability to implement advanced supply path optimization strategies without the overhead of building and maintaining these capabilities in-house. This collective approach not only helps publishers achieve better revenue outcomes but also positions them more strongly in an increasingly complex advertising ecosystem.

Technical Considerations for Publishers

Supply path optimization requires careful attention to technical details that can significantly impact performance. Publishers need to focus on several key areas to maximize their success.

  • Traffic shaping to ensure you're sending the most valuable bid requests to each buyer
  • Intelligent price flooring that accounts for different user segments and traffic types
  • Management of queries per second (QPS) to optimize for both performance and cost
  • Implementation of proper ads.txt entries to maintain transparency and control

The technical aspects of supply path optimization require ongoing monitoring and adjustment to maintain optimal performance.

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Top 10 Questions About Supply Path Optimization

1. What exactly is supply path optimization and why does it matter?

Supply path optimization (SPO) is the process, from the buy side, of identifying and using the most efficient paths to purchase ad inventory. It matters to publishers because it can affect both the cost and performance of your ad inventory. Publishers need to understand SPO because it influences how buyers access their inventory and ultimately impacts revenue potential.

2. Will direct-to-DSP connections make me more money?

Not necessarily. While direct-to-DSP connections might reduce take rates, DSPs often simply reduce their bids by the same percentage they save on fees. The real value comes from being prepared for future changes in buying patterns and maintaining access to important demand sources.

3. Do I need to work with multiple SSPs?

Yes, but with strategic consideration. Working with multiple SSPs can provide access to different demand sources, but it's important to evaluate each relationship based on:

  • The unique demand they bring
  • Their performance metrics
  • The value they add through features or data
  • The operational overhead they require

Having too many SSP relationships can lead to inefficiencies and increased complexity. It is all about finding the perfect balance.

4. How do I know if I have the right scale for direct DSP connections?

The scale requirement varies by DSP, but generally, you should consider:

  • Your monthly impression volume
  • Geographic distribution of your traffic
  • Types of inventory you offer
  • Your technical resources to manage direct connections

Smaller publishers often benefit more from working with partners, like Playwire, who can aggregate inventory to achieve necessary scale for securing a direct to DSP connection.

5. What role do resellers play in supply path optimization?

While they should be used minimally, resellers can still provide value in the supply chain if they:

  • Add valuable data to the bid stream
  • Provide higher match rates with certain buyers
  • Offer unique demand relationships
  • Deliver better performance than direct paths

The key is evaluating whether the value they add justifies their take rate.

6. How should I manage my ads.txt file for optimal SPO?

Effective ads.txt management requires:

  • Regular auditing of all entries
  • Understanding the purpose of each relationship
  • Removing unnecessary or underperforming paths
  • Maintaining clear documentation of authorized sellers
  • Regular evaluation of reseller relationships

This helps reduce bid duplication and maintain clean supply paths.

7. What technical resources do I need for effective SPO?

The technical requirements depend on your approach but typically include:

  • Engineering resources for implementation and maintenance
  • Yield management expertise
  • Analytics capabilities
  • Ad operations support
  • Quality assurance testing capabilities

Publishers without these resources often benefit from managed service providers.

8. How does traffic shaping work and why is it important?

Traffic shaping involves strategically directing bid requests based on buyer behavior and preferences. It's important because:

  • It reduces infrastructure costs for SSPs and DSPs, giving them improved efficiency when buying on your site
  • Improves bid rates
  • Increases efficiency of the bidding process
  • Helps maintain good relationships with demand partners

Effective traffic shaping requires ongoing analysis and adjustment.

9. How will the deprecation of third-party cookies affect SPO?

Cookie deprecation will impact SPO in several ways:

  • Increased importance of first-party data
  • Greater emphasis on contextual targeting
  • New identity solutions becoming part of the supply path
  • Changes in how buyer segments and target audiences

Publishers need to prepare by developing strong first-party data strategies and exploring alternative targeting solutions.

10. Should I use a managed service provider or handle SPO myself?

This decision depends on several factors:

  • Your internal resources and expertise
  • Current revenue scale
  • Technical capabilities
  • Available budget for staff and tools
  • Growth objectives

Most publishers need to evaluate whether the cost of building and maintaining internal capabilities justifies the potential benefits compared to using a managed service provider.

The Future of Supply Path Optimization

As the digital advertising landscape continues to evolve, supply path optimization will become increasingly sophisticated. Publishers need to stay informed about emerging trends and technologies.

  • Machine learning and AI are playing a larger role in optimization decisions
  • The deprecation of third-party cookies is driving new approaches to user identification
  • First-party data and contextual signals are becoming more important in the bidstream
  • Industry consolidation may reduce the number of intermediaries naturally

These developments will continue to shape how publishers approach supply path optimization in the coming years.

Making the Right Choice for Your Business

When it comes to supply path optimization, there's no one-size-fits-all solution. Publishers need to evaluate their specific situation and choose the approach that best fits their needs.

  • Consider your current scale and growth trajectory
  • Evaluate your internal technical resources and expertise
  • Assess the costs and benefits of different optimization strategies
  • Think about your long-term business goals and how they align with different approaches

The key is to find a supply path optimization strategy that aligns with your capabilities while positioning you for future success.

The Bottom Line

Supply path optimization continues to evolve as a critical component of digital advertising success. Whether you're a large publisher considering direct DSP connections or a smaller publisher looking to optimize your current setup, understanding and implementing proper supply path optimization strategies is essential for maximizing your advertising revenue. Stay informed about industry developments and be prepared to adapt your approach as the landscape continues to change.

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